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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






2. Ed = 1






3. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






4. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






5. A firm that has market power in the factor market (a wage-setter)






6. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






7. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






8. Occurs when LRAC is constant over a variety of plant sizes






9. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






10. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






11. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






12. The marginal utility from consumption of more and more of that item falls over time






13. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






14. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






15. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






16. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






17. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






18. The imbalance between limited productive resources and unlimited human wants






19. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






20. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






21. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






22. The total quantity - or total output of a good produced at each quantity of labor employed






23. Product demand - productivity - prices of other resources - and complementary resources






24. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






25. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






26. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






27. Ed = 8 - infinite change in demand to price change






28. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






29. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






30. Models where firms agree to mutually improve their situation






31. The additional cost incurred from the consumption of the next unit of a good or a service






32. The difference between total revenue and total explicit and implicit costs






33. Ei = (%dQd good X)/(%d Income)






34. 0 < Ei < 1






35. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






36. The mechanism for combining production resources - with existing technology - into finished goods and services






37. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






38. Two goods are consumer substitutes if they provide essentially the same utility to consumers






39. A good for which higher income decreases demand






40. The change in quantity demanded resulting from a change in the price of one good relative to other goods






41. The rational decision maker chooses an action if MB = MC






42. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






43. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






44. The sum of consumer surplus and producer surplus






45. Ei > 1






46. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






47. Demand for a resource like labor is derived from the demand for the goods produced by the resource






48. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






49. Exists if a producer can produce more of a good than all other producers






50. Entry of new firms shifts the cost curves for all firms downward







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